Performance fines begin as Ofwat accepts code change proposal

Ofwat has accepted and implemented a code change proposal which sought to adjust the Market Performance Standards (MPS) regime ahead of business market performance charging (where trading parties are fined for falling short of agreed standards). The change came into force on 1 April 2018.

The code change proposal, CPW030, made a series of proposals to address the shortcomings identified in the MPS regime the market opened with. Key proposals included capping charges at 0.15% of monthly invoice value for any trading party; reducing fines for retailers by half the amount wholesalers have to pay; and making a special allowance for meter read provision so the first 5% of missing reads don’t incur a charge.

Ofwat accepted all changes, though it stipulated a report be delivered to it by the end of the year reviewing the situation. It noted the missed meter reads special provision was contentious and must be closely monitored as part of the review.

The regulator has yet to report its decision on CPM008, a separate but accompanying code change proposal which seeks approval to change the code’s default provision for what happens to the fines collected from retailers and wholesalers. It proposed receipts are split into separate wholesaler/retailer pots and then redistributed according to market share on that ring fenced basis, rather than redistributed as a single pot.

MPS charges were suspended for the first year of operations to allow time for market participants and MOSL to ensure their processes were robust.